REIT Fund May Reach Four-Year High: Technical Analysis

The iShares Dow Jones U.S. Real Estate Index Fund may increase as much as 13 percent after breaking above a price level where it has stalled previously, according to Katie Stockton of MKM Partners.

The fund, which tracks the U.S. real estate industry and currently trades at $63.81, crossed the resistance level of $63 in the week ending May 4, according to the firm’s analysis. The fund had approached that level and retreated three times last year and again in April. Crossing the threshold could send the fund’s price to $72, about the level it last reached in May 2008, Stockton wrote in a May 9 report.

“This breakout targets that May 2008 level over the long-term, meaning the next several months,” Stockton, chief market technician at MKM, said in a telephone interview. “It might be sooner than that. It’s a relatively conservative upside target.”

The breakout by the Reit index fund, which has risen 12 percent this year while the Standard & Poor’s 500 index advanced 7.7 percent, is a “bullish development” for the industry, Stockton wrote in the report. The fund reached its year-to-date intraday high of $64.87 on May 1.

The fund shows signs of being overbought, implying that it may fall as low as $59 before it rises to $72, according to Stockton.

“Because it’s run into some resistance you might see it stabilize, if not underperform, for a little period here,” Stockton said. “It’s not an area of the market I would short because it has broken out, but I would certainly wait for a better point of entry.”